AICPA Insightstag:typepad.com,2003:weblog-866829862384821872015-02-02T07:00:00-05:00TypePadHow the New Congress Might Affect the CPA Professiontag:typepad.com,2003:post-6a0133f5884316970b01b7c742345c970b2015-02-02T07:00:00-05:002015-02-02T10:20:39-05:00Meet the new Congress. Same as the old Congress? That remains to be seen. The 114th Congress opened on January 6 with 74 new members of the House and Senate, 104 women – more than ever before, and the largest House Republican majority since 1929. Those are the numbers, but...Barry Melancon, CPA

Meet the new Congress. Same as the old Congress? That remains to be seen. The 114th Congress opened on January 6 with 74 new members of the House and Senate, 104 women – more than ever before, and the largest House Republican majority since 1929. Those are the numbers, but let’s look at what they mean for the CPA profession.

Our profession’s core services are greatly impacted by the legislators and regulators who set policy and standards. The November election brought many changes and several new faces to Washington. One thing that did not change, however, was a strong CPA presence. I was very pleased that nine CPAs were reelected to the House. I know that these nine individuals, as well as other CPAs, whether as elected officials or active constituents, will continue to provide crucial experience and guidance. In light of the new representatives, staff members and committee chairs in the Congress, we have been reviewing our advocacy and education efforts on initiatives affecting the profession and the public.

We expect Congress to focus on certain issues in 2015. Here is a brief summary of the more significant ones.

Tax Reform

Last February, Rep. Dave Camp (R-Mich.), as Chairman of the House Ways and Means Committee, released a tax reform discussion draft. Although Camp has retired from the House, his proposals could become a blueprint for discussion this year. We have shared comments on various aspects of Chairman Camp’s proposal and will continue to serve as a congressional resource. We continue to advocate for tax reform that embodies administrative ease, fairness and simplification, but unless the political climate materially changes, passage of a comprehensive tax reform bill remains unlikely.

Cash Basis Method of Accounting

As part of his broader tax reform package, Chairman Camp proposed that many businesses, including pass-through entities, switch from the cash basis to accrual accounting for tax purposes. In November 2013, then Senate Finance Committee Chairman Max Baucus released a tax reform discussion draft which also included a limitation to the cash basis method. We believe the proposals would increase administrative and recordkeeping burdens as well as create timing and collection challenges that would disadvantage CPAs and certain other taxpayers. As a result, the AICPA is a leading member of a multi-industry coalition opposing those proposals. We worked with state CPA societies and member firms to alert Congress to the negative implications. Your letters – hundreds of them – have drawn significant attention to this issue. In response, 46 Senators and 233 members of the House signed bipartisan letters opposing the proposals. Such a show of support is an incredible achievement. We will continue to remain vigilant because we anticipate that these proposals could resurface in future tax reform discussions.

Mobile Workforce

Federal mobile workforce legislation is another issue of interest. A high percentage of businesses, including many CPA firms, have employees temporarily working in states other than where the firm or company is located. Legislation was progressing last year but will need to be reintroduced in the new Congress, and we believe that will happen. Forty-one states currently impose a personal income tax on wages, regardless of whether the taxpayer is a resident of the state. In fact, some states require withholding for as little as one day of work. We supported legislation that enjoyed bipartisan support and would have established a uniform national standard for any employee who works less than 30 days outside his or her state of residence. Despite increased congressional support, this legislation was shelved to allow for resolution of more controversial state taxation bills and ultimately died at the end of 2014 when the 113th Congress came to a close. Having a uniform national standard for state nonresident income tax withholding would significantly improve the current complex system, increase compliance and promote interstate commerce.

Patent Reform

We also are closely following patent reform discussions on Capitol Hill. Patent trolls are bringing lawsuits against companies or firms regarding patent infringement for mundane daily uses of technology. One of the most egregious examples is a patent on scanning a document to email. The profession got involved early, submitting testimony at hearings outlining how trolls are detrimental to the profession. The AICPA supports efforts for patent reform. Congress made some headway on this issue last year, passing a bill dealing with patent trolls, but the Senate did not act. We expect this legislation to be a priority this year.

Tax Extenders

In late December, Congress once again extended 50+ tax provisions, continuing a short-term approach that brings with it an inherent uncertainty for individuals and businesses alike. The agreement renewed the provisions for 2014, leaving Congress to debate these same issues in 2015. Perpetual uncertainty is precisely why the AICPA believes that tax laws should be enacted with a presumption of permanency, except in rare situations. We’re hopeful that 2015 will be the year when Congress permanently extends these tax provisions.

U.S. Finances

We remain concerned about the long-term prognosis for the federal government’s fiscal health.

Yes, deficits have declined in recent years, but the Congressional Budget Office is projecting the return of trillion dollar deficits within the next decade. That’s why we will not abandon our commitment to fiscal responsibility. We will continue to look for opportunities to remind lawmakers about the value of using the U.S. government’s financial statements to gain a greater understanding of the nation’s fiscal health.

CPAs in Congress

As I mentioned before, CPAs in Congress are not only critical to the profession, but to fiscal matters for our country. Likewise, CPAs serving in state legislatures and Governorships is equally critical. At the start of 2015 there are more than 60 CPAs serving in state Houses and Senates, one CPA is a governor (Michigan’s Rick Snyder), and one is a Lieutenant Governor (Ohio’s Mary Taylor). We thank them all for their service to our country and for bringing the competencies of the profession forward to elected government service.

You Can Help Advance Advocacy Efforts

We will keep you informed of progress on these and other issues as developments unfold throughout the year. As you can see, CPA involvement at the grassroots level is critical to the profession’s advocacy efforts. If you want to get involved, consider participating in our Key Person Program. Contact Vicki Simmons at congaffairs@aicpa.org for information.

Barry C. Melancon, CPA, CGMA, President and CEO, American Institute of CPAs

Strengthening the Profession’s Core with Relevance, Rigor and Reachtag:typepad.com,2003:post-6a0133f5884316970b01bb07c4c8cc970d2014-12-16T07:00:00-05:002014-12-16T07:00:00-05:00I am excited to write to you as the new chair of the AICPA Board of Directors. I hope to meet many of you at the numerous conferences, state society meetings and firm visits that I have lined up between now and next October. The Chair’s Letter also is a...Tommye E. Barie, CPA

I am excited to write to you as the new chair of the AICPA Board of Directors. I hope to meet many of you at the numerous conferences, state society meetings and firm visits that I have lined up between now and next October. The Chair’s Letter also is a great forum to discuss common experiences and important developments. Throughout the year, I will share my thoughts on key trends and emerging professional issues. I hope you’ll share your comments with me and our fellow CPAs so we can have a robust dialogue.

Let me begin by telling you a little about myself. I grew up in the tiny town of West Liberty, Kentucky, home to about 2,000 people and two stoplights. I was raised on small-town values that remain with me today. These values – hard work, integrity, community and commitment – first attracted me to the accounting profession, and now they will shape my stewardship as AICPA Chair.

As a child, I was always drawn to sports and still enjoy them. During my free time you can usually find me riding the waves on my kiteboard. Kiteboarding is an exhilarating sport. To do it, you strap a small board to your feet and climb into a harness with a large kite. You then catch the wind in your kite and ride the waves while using your core to maintain balance. Kiteboarding is a great analogy for what we as a profession face every day. External forces are changing the landscape faster than ever, and we must use our core strength to ride that constantly changing wind. We must constantly reposition our profession to ensure the wind stays in our kite. Like the kite boarder, the accounting profession’s success and adaptability are directly linked to the strength of our core. During the next year, I will focus on three factors that are critical to enhancing our profession’s strong core: relevance, rigor and reach.

Here’s what these factors mean and the steps the AICPA is taking to address each one:

Relevance means anticipating the constantly changing winds and positioning ourselves accordingly. Our profession’s core services clearly establish our relevance in many areas. The CPA profession is a strong and consistent voice on accounting, auditing and tax matters and takes steps to protect CPAs and the public. But relevance also means keeping up with changing needs and market demands. The Future of Learning project explores ways in which we can modernize our learning model to remain relevant in this changing environment.

Rigor means demanding the best of ourselves and our services. To have the core strength to stay on a kiteboard, you have to train, pay attention to details and understand the demands of your discipline. CPAs know all about that kind of rigor. To make sure we maintain our high standards, the AICPA has augmented our commitment to excellence through our new Enhancing Audit Quality initiative, which, among other objectives, will reimagine peer review to meet evolving needs and take advantage of new technologies. Rigor is equally important in business and industry. Beginning this January, CGMA designation candidates will be required to pass a strategic case study exam. A single global exam will help ensure consistency and competence.

Reach also means embracing today’s global economy and the new service opportunities it brings. I’ve experienced this firsthand. One of my clients, a tech firm in Orlando, Fla., handles a variety of software used in numerous aspects of airline travel - from scanning bags to checking in at kiosks. Their reporting is rolled into the financial statements of their parent company in Germany, so we created a package that gets them from GAAP to IFRS. I never imagined my work would have such a significant global component. But that’s the reality of business today. As business expands, and technology removes barriers, CPAs will need to work with broader groups of people in all parts of the world.

We also must be a profession that is as broad as the clients and employers we serve. And as we increase our reach, we must fight the urge to stay in the here and now. We must strengthen our core and control our direction – doing so allows us to leverage the winds and position ourselves for success. I look forward to taking this exciting ride with you.

AICPA President and CEO Looks Ahead to 2015tag:typepad.com,2003:post-6a0133f5884316970b01bb07bbd3d8970d2014-12-08T08:00:00-05:002014-12-08T09:10:08-05:00In an interview with CPA Letter Daily, AICPA President and CEO Barry Melancon, CPA, CGMA, reflects on the accounting profession’s successes in 2014 and discusses the opportunities and challenges of 2015. Below is an excerpt from the interview; for the full interview, watch the accompanying video. 1). What have been...AICPA Communications

In an interview with CPA Letter Daily, AICPA President and CEO Barry Melancon, CPA, CGMA, reflects on the accounting profession’s successes in 2014 and discusses the opportunities and challenges of 2015. Below is an excerpt from the interview; for the full interview, watch the accompanying video.

1). What have been the biggest accomplishments for the profession this year?

This year the AICPA and profession have focused on a wide range of quality initiatives. The public practice area hinges on quality. Our committees, staff, governing Council and our board have done a great job of addressing new ways to deepen and extend our quality commitment and capturing those issues in a discussion paper published in August. That gave us an extended period to talk about some things that we need to do as a profession to keep our quality commitment at the highest levels. The current effort will obviously carry over into the next year, but we’ve set down a foundation.

When you step back and take a broad view, you see that our profession is really well positioned. For decades we’ve conducted a periodic brand survey of the CPA profession, and the American public’s opinion of CPAs is now at an all-time high.

Finally, we're very proud of the fact that the AICPA’s membership grew to over 400,000 this year. That was a big accomplishment and it’s a reflection of the interest in the profession, how well we carry out our mission, our service to entrepreneurs and our work in protecting the public interest in audits.

2). Where has the profession's legislative and regulatory advocacy been most effective?

We have a long track record of very strong success in Washington, D.C. It’s really a joint effort of the AICPA and state CPA societies.

Once again, we’ve been influential in the passage of certain pieces of legislation. Take the DATA Act, something we’ve been involved with for about five or six years. It begins with XBRL, something that was basically created by the profession. Generally, the Act requires the federal government and all its agencies by 2016 to report financial information in a way that the American public and other interested parties can easily access with machine-adaptable and machine-readable inquiries, enabling them to really understand our federal government from a financial perspective.

We also were actively monitoring numerous developments in the tax area. Identity theft, repair regulations, and Affordable Care Act compliance and forms are among the many issues we are addressing. Regarding issues included in tax reform discussions, on one hand we successfully stopped some proposals that we thought would not produce good outcomes. On the other, we continued to push for several changes that would benefit taxpayers and tax practitioners. Among them are education incentives and automatic disaster relief, and we are still working these recommendations through the process. Regarding the repair regulations issue, in the House we met with the two CPAs in Congress who serve on the House Small Business Committee, Congressman Rice (R-SC) and Congressman Murphy (D-FL), and in the Senate we met with Senator Risch (R-ID) and Senator Heitkamp (D-ND), who serve on the Senate Small Business Committee, to discuss the IRS’s rules that went into effect on January 1, 2014. Both the House and Senate members sent letters to the IRS urging the IRS to make the rules prospective and to increase the de minimus safe harbor threshold to $2,500 for small businesses.

All of us understood that the likelihood of tax reform in this political environment wasn’t high, but we participated aggressively in the process and will continue to do so. We provide valuable input on technical and administrative issues to the House Ways and Means Committee, the Senate Finance Committee and the Internal Revenue Service specifically to try to help focus on tax reform.

We spent a lot of energy fighting a cash basis proposal that emerged as part of a planned tax reform bill that ultimately did not pass. The proposal would have done away with cash basis for professional service entities over a certain size and had the potential to affect firms and other entities that could use cash basis. In the end, a majority of Congress signed a letter saying they did not think that change, whenever tax reform is debated, would be the right thing to do.

3). What are the profession’s top three priorities for 2015?

The quality initiative is going to be one of the top priorities. Over the last five or six years, there has been a litany of efforts to support quality, starting with the audit clarity project and including numerous new resources, such as the Center for Plain English Accounting, as well as our advocacy for differential accounting standards.

The audit quality white paper published in August talks about some near-term changes that will mostly have an impact on peer review and possibly quality control standards. Other quality initiatives will be a continuing process, such as efforts to encourage a greater focus on quality, particularly for work done in the regulated industries, like employee benefit plan and governmental audits.

Later in December, we plan to issue a concept paper that paints a thought-provoking picture of what peer review could evolve into in the 2020s, called “Practice Monitoring of the Future.”

Both of these papers involve change management, so there will be pieces that people like and some they don’t. But I encourage all practitioners to read and comment on them. They are discussion papers, not proposals of standards. Comments will be filtered into the committees, which will bring forth some of the discussion paper items as proposals in a formal fashion in 2015. So, quality is a top priority.

Second is the Chartered Global Management Accountant (CGMA) designation. Today there are about 150,000 CGMAs worldwide, about 49,000 here in the United States. And in 2015, a number of new procedures will be in place – a new exam, new expectations, a new syllabus, new learning tools, a set of principles for management accounting – that are intended to help elevate the function of management accounting globally. It will be fun and exciting to see that effort mature to a different level.

The third is the human capital area. In my travels, I find that everybody’s talking about the need to find and keep the best people, and the many related issues. But let me make the point that maybe is the most important one right now.

We have had about six consecutive years of record numbers of people majoring in accounting. That’s a great thing. For the last three years, however, we’ve basically had a level number of people taking the CPA exam. So there is a gap that’s building.

A major research project under way will help us to better understand that development. We want to find out what’s causing people to sit or not sit for the exam and then design tactics to deal with it strategically. The results will help us design and implement tactics to reverse the trend. That will involve the AICPA as well as state societies, firms themselves and management accounting functions or finance functions in business.

4). Why are diversity and inclusion initiatives so important for the profession?

The fact is we have not done a good job of bringing different ethnic groups into the profession. We could also talk about women in the profession, and there are some good stories there, and some work that needs to be done.

If you look at society as a whole, America truly is a melting pot. In less than two decades, there will not be a majority of any background in this country. That means that entrepreneurism is increasingly going to be owned by a more diverse population of Americans. If, as a profession, we want to serve entrepreneurs for the next 10, 20 or 50 years, we need to reflect and look like the people who own entrepreneurial capital. Today, if you look at the data, there is a huge gap between the makeup of our profession and of our society and entrepreneurs. That is going to continue to grow, so there’s a business imperative to find ways to be a profession that is inclusive.

The fact of the matter is, if you compare our profession to the other professions on almost any measure – attractiveness, how we look at the future – we’re going to stack up very, very well. But diversity is one area where we wouldn’t stack up well. And we think it’s strategically important for us to embrace that so that when we sit here in the future our dynamic profession will reflect the demographic realities of society.

To see the full interview, including Melancon’s thoughts on technology implications, the AICPA’s human capital initiatives and the one thing he wishes members knew about the AICPA, watch the video.

Ever found yourself wondering why all the fuss over patent trolls? Aren’t patent holders entitled to invention protection and the right to license their discovery to others who manufacture and sell it? Of course. But, in a disturbing trend, many patent assertion entities – better known as patent trolls – are using litigation to wrongfully target end-users of such products.

If, for example, your office has a copier with a “scan to email” function, your company or employer could be at risk. As holders of vague patents, some PAEs have sent letters to small businesses, demanding approximately $1,000 per employee for the use of such scanners. The demand letter’s message: settle or be sued. Most choose to settle, primarily because of concerns about the cost of a defense.

Trolls use patents as legal weapons, instead of coming up with new ideas or creating new products. And they are a growing problem for CPA firms and countless other businesses nationwide. In fact, more than 100,000 businesses were threatened by PAEs in 2012. A Santa Clara University professor found that 55 percent of defendants to patent troll suits are small, with less than $10 million in annual revenue. Worse yet, the number of patent infringement lawsuits and defendants are on the rise (see chart for estimated number of defendants in patent infringement lawsuits, 2007 to 2011).

Congress and the White House have taken notice and are taking action. As President Obama urged lawmakers in his State of the Union address, "Let’s pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.”

The House has already done so. The Innovation Act, H.R. 3309, passed last December on a vote of 325-91. A comparable measure, the Patent Transparency & Improvement Act (S. 1720) is now under consideration in the Senate. The AICPA submitted written testimony in support of both bills that promotes the profession’s guiding principles for patent reform:

Protect “off-the-shelf” use by consumers and business. This principle, in part, aspires to force the dispute to concern the proper parties: patent owner vs. supplier (rather than the end user).

More readily available challenges or defenses for small businesses / individual. This calls for an alternate tribunal for small business or “Main Street” customers that is cheaper and faster than litigation.

Greater transparency in the entity asserting the patents. This would require disclosure of more than a holding company and allow recipients to better identify a patent owner and pool resources if a common real party in interest.

Cost-shifting to patent holding companies for unsuccessful litigation. A PAE that is a losing party would ultimately pay a defendant’s costs and fees, under this principle.

Together, these four principles represent a solid foundation in reforming the patent litigation system. And the good news is that several are addressed in both pieces of legislation.

The Senate Judiciary Committee’s deliberations continue and a vote is on the horizon. For its part, the White House is hopeful bipartisan legislation will reach the President’s desk this year. In the final analysis, a new patent reform law may not stop trolls from demanding settlements up front, but it will make patent trials a less threatening proposition. That’s something to think about the next time you email a scanned document.

Q&A with Barry Melancon, CPA, CGMA, AICPA President & CEOtag:typepad.com,2003:post-6a0133f5884316970b019b00fd3af3970d2013-12-16T14:00:00-05:002014-10-06T15:15:35-04:00What opportunities and challenges does the head of the AICPA foresee for the CPA profession in 2014? What were the profession’s significant achievements in 2013? Barry C. Melancon, CPA, CGMA, AICPA president and CEO, answers these questions and offers insights on how the profession will continue to adapt to today’s...AICPA Communications
<div xmlns="http://www.w3.org/1999/xhtml"><p><a class="asset-img-link" style="float: right;" href="http://aicpa.typepad.com/.a/6a0133f5884316970b019b02bd0ec9970b-pi"><img class="asset asset-image at-xid-6a0133f5884316970b019b02bd0ec9970b img-responsive" style="margin: 0px 0px 5px 5px;" title="Q&amp;A" src="http://aicpa.typepad.com/.a/6a0133f5884316970b019b02bd0ec9970b-800wi" alt="Q&amp;A" border="0" /></a>What opportunities and challenges does the head of the AICPA foresee for the CPA profession in 2014? What were the profession’s significant achievements in 2013? Barry C. Melancon, CPA, CGMA, AICPA president and CEO, answers these questions and offers insights on how the profession will continue to adapt to today’s changing environment, addressing clients’ and employer’s needs. Citing successes with regulation, legislation, recruitment and positioning the profession for the future, Barry strongly believes CPAs will build on a solid foundation.</p>
<blockquote>
<p><strong>1. What were the AICPA’s legislative or regulatory priorities this past year and what’s in store for 2014?</strong></p>
</blockquote>
<p>We continued to have success in the advocacy area in 2013. In one significant victory for the profession and the public, the Securities and Exchange Commission <a href="http://www.journalofaccountancy.com/News/20138795.htm">exempted CPAs from registration as municipal advisers</a> when they are providing certain accounting or attest services. We urged the SEC to exempt CPAs from the definition of municipal advisers after it had indicated that anyone performing accounting services for governments would be defined as a “<a href="http://www.aicpa.org/advocacy/issues/pages/municipaladvisors.aspx">municipal adviser</a>.” It was critical that our voices be heard on this issue because such a broad definition would have made it more difficult for CPAs to serve governments and potential investors without taking on unnecessary and duplicative costs or compliance burdens.</p>
<p></p>
<p>Along with state CPA societies and the National Association of State Boards of Accountancy, the AICPA is urging state legislatures to adopt a revised definition of attest in the Uniform Accountancy Act. The AICPA and NASBA released a public exposure draft of new model legislative language earlier this year, and received overwhelmingly positive comments from interested stakeholders. The new proposed definition would revise the current model definition of attest to ensure that only licensed CPAs operating within a licensed CPA firm can issue reports based on the AICPA’s professional standards (that is, statements on standards for attestation engagements). I believe it’s critical that companies and end users of their attested reports have confidence in those performing these services. And CPAs operating within CPA firms are the only practitioners who meet the appropriately high bar of necessary competencies, education, experience and oversight to protect the public interest in this area. The AICPA also has partnered with NASBA to support state CPA societies and state boards of accountancy who may want to approach their state legislatures to inquire about passing a new law to permit CPA firm mobility.</p>
<p>Now I’ll mention a tax situation. When a court decision struck down the Internal Revenue Service’s preparer tax identification number program, members found themselves unable to affix a valid PTIN to their clients’ tax returns. We conferred with the IRS to <a href="http://media.journalofaccountancy.com/JOA/Issues/2013/02/PTIN_database.pdf">address our members’ concerns</a>, resulting in the IRS reopening the PTIN system.</p>
<p>Looking ahead, our top legislative and regulatory priorities in 2014 include <a href="http://www.aicpa.org/Advocacy/Tax/Pages/TaxReform.aspx">tax code simplification</a> and <a href="http://www.aicpa.org/Advocacy/Issues/Pages/InterstateTaxationMobileWorkforceBill.aspx">mobile workforce legislation</a>. As far as tax reform, the timing is uncertain but it now appears to have pushed out to possibly 2015 for final legislation. Regardless, our tax and congressional affairs teams and volunteer leaders have been and will continue to serve as a resource for members of Congress. On the other hand, mobile workforce legislation is progressing quite well. This legislation would set a national standard for the taxation of employees when performing work outside their home state and reduce related regulatory burdens for businesses that operate interstate. Both the House and Senate have introduced bipartisan bills and we are hopeful this legislation gets signed into law.</p>
<blockquote>
<p><strong>2. What do you think about the Public Company Accounting Oversight Board’s proposed changes to the auditor’s report? What other PCAOB developments should we watch?</strong></p>
</blockquote>
<p>First, let me highlight two developments with very positive implications: <a href="http://www.aicpa.org/press/pressreleases/2013/pages/aicpa-applauds-house-passage-of-audit-integrity-job-protection-act.aspx" target="_self">bipartisan passage of a House bill prohibiting the PCAOB from requiring mandatory audit firm rotation</a> and a companion bill that has been introduced in the Senate. These moves signal that mandatory audit firm rotation is less likely to move forward in the U.S. Still, we continue to monitor developments abroad, specifically in the European Union where it has gained some traction.</p>
<p>In regard to changes to the auditor’s report, the <a href="http://www.thecaq.org/" target="_blank">Center for Audit Quality</a>, which is affiliated with the AICPA, has called for responsible changes in this area and prepared a comment letter. I’ll summarize it this way. Certain additional information in the auditor’s report may provide value for investors and other financial statement users, and we support that, but the new information has to be seen in the context of increased risk for auditors. I also agree with the investor position that such information should come from company management, with auditors providing assurance on it. In addition, any changes to the process should encompass enhancements to the roles and responsibilities of all parties in the financial reporting system. Overall though, this is a good evolutionary direction.</p>
<p>Lastly, I commend the PCAOB for its foresight to work on an audit standard for revenue recognition. The Financial Accounting Standards Board is expected to release the new, converged revenue recognition standard in the first quarter of 2014. Coordination of accounting and auditing standards is critical to enhancing audit quality.</p>
<blockquote>
<p><strong>3.&nbsp;</strong><strong>How has the marketplace responded to the Financial Reporting Framework for Small- and Medium-Sized Entities?</strong></p>
</blockquote>
<p>The <a href="http://www.aicpa.org/INTERESTAREAS/FRC/ACCOUNTINGFINANCIALREPORTING/PCFR/Pages/Financial-Reporting-Framework.aspx">FRF for SMEs framework</a> was the AICPA’s answer to a need in the marketplace and we’re hearing that it has generated a great deal of excitement. Firms have embraced it as a new opportunity to serve clients in their role of trusted business advisers. We know that a number of firms are preparing to roll it out to their clients for 2013 financial statements and have been meeting with lenders. Our targeted ad campaigns to small business owners and financial statement users have been successful as well, based on traffic to our toolkits for those stakeholders.</p>
<p>I want to reiterate that the FRF for SMEs is in the non-GAAP space. In the GAAP arena, we’re pleased that the Financial Accounting Foundation’s Private Company Council has made quick progress in recommending alternatives in GAAP for private companies. In fact, the FASB has endorsed two of the PCC’s proposals already. Many companies need to use U.S. GAAP, and they’ll have the option of applying standards that are less complex and potentially less costly than before, something we certainly support. &nbsp;</p>
<blockquote>
<p><strong>4. </strong><strong>Can you tell us about the Chartered Global Management Accounting designation and what new developments are on the horizon?</strong></p>
</blockquote>
<p>I’m thrilled by how many of our members see the value in the <a href="http://www.cgma.org" target="_self">CGMA designation</a>. It’s not even two years old and yet more than 41,000 AICPA members have become designation holders. The CGMA is now the most prominent management accounting credential in the U.S. Globally, including Chartered Institute of Management Accountants members, there are about 140,000 CGMAs.</p>
<p>The program offers extensive resources, tools and reports as well as a robust peer community. Besides building on these important benefits as we go into 2014, we are continuing to develop the exam that will be put in place for new CGMAs starting in January 2015. The exam was planned from the beginning, before the launch, and its development has been ongoing since. It’s a strategic case study exam that further adds to the rigor of the application process.</p>
<blockquote>
<p><strong>5.&nbsp;</strong><strong>Given the declining youth population and the profession’s need for future CPAs, how is the AICPA addressing human capital issues?</strong></p>
</blockquote>
<p>The AICPA recognized the potential pipeline issues years ago as a result of our Vision Project in the 1990s, which was the precursor to the CPA Horizons 2025 project that was completed in 2011. We developed programs that introduce students to the CPA profession and all it has to offer. Our flagship site for college students, <a href="https://www.thiswaytocpa.com/" target="_blank">ThisWayToCPA.com</a>, was designed to introduce students to the profession and help guide them in becoming CPAs. Replacing the retiring CPAs isn’t enough, though. We also have to train, mentor and advance future CPAs who can lead the profession into the future. The AICPA Leadership Academy, launched in 2009, has graduated 165 future and current leaders. Many of these graduates currently serve on AICPA and state society committees. Our efforts on that front include the <a href="http://www.aicpa.org/interestareas/youngcpanetwork/Pages/YoungCPANetwork.aspx">AICPA Young CPA Network</a>, a vital community in which young CPAs can exchange ideas and information to gain a richer understanding of the possibilities of their careers.</p>
<p>We’ve also been hard at work to enhance the CPA profession’s diversity, making sure we capture the best minds and the top skills to meet the future needs of our clients, employers and communities. The <a href="http://www.aicpa.org/career/diversityinitiatives/pages/aicpanationalcommissionondiversity.aspx">AICPA National Commission on Diversity and Inclusion</a> is charged with creating resources and tools to help companies strengthen their diversity efforts.</p>
<p>All in all, we’re engaged in a continuing quest to fill the pipeline so we can maintain the high quality for which our profession is known. Each and every one of us is a building block for our profession, and our human capital issues are key to the profession’s success.</p>
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<p><a href="http://www.shutterstock.com/pic-49028416/stock-photo-questions-and-answers-text-d-rendered-illustration-isolated-on-white.html" target="_blank">Q&amp;A image</a> via Shutterstock</p>
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Preserving Cash Accountingtag:typepad.com,2003:post-6a0133f5884316970b019b00f3161f970b2013-11-14T07:00:00-05:002013-11-14T07:00:00-05:00Humorist Art Buchwald once described tax reform as taking the taxes off things that have been taxed in the past and putting taxes on things that haven’t been taxed before. Buchwald’s amusing analysis notwithstanding, tax reform is an arduous task. There are a lot of moving parts being studied on...Jay Hyde

Humorist Art Buchwald once described tax reform as taking
the taxes off things that have been taxed in the past and putting taxes on
things that haven’t been taxed before. Buchwald’s amusing analysis notwithstanding,
tax reform is an arduous task. There are a lot of moving parts being studied on
Capitol Hill at the moment. And one part in particular is of great concern to
the nation’s CPAs.

As Congress considers the most significant attempt at tax
reform in almost 30 years, the House Ways and Means Committee has produced a
small business tax reform discussion draft that focuses on simplifying the tax
codes for small businesses, including individuals and passthrough entities.
While supportive of the Committee’s efforts to simplify the tax code and
responsiveness to taxpayer concerns that the code is too complex, the AICPA
strongly opposes a proposed limitation on the use of the cash basis method (for
the non-CPAs among us, the cash method recognizes revenue and expenses when
cash is received or disbursed rather than when earned or incurred. It is
simpler in application, has lower compliance costs, and does not require
taxpayers to pay tax before receiving the income being taxed).

To help offset revenue reduction in tax reform, the
proposal would accelerate revenue collection from CPA firms and thousands of
other businesses through the use of the accrual method. But that is a timing
shift, not a simplification of the tax code.

Restricting the use of the cash method would create a
hardship for the partners of CPA firms and owners of other entities in the
professional services sector, such as actuaries, architects, consultants,
engineers, doctors and lawyers. In fact, it would force business owners operating
in any form of organization other than sole proprietorships to pay tax in
advance of collecting cash payment from their clients and customers if average
gross receipts of the business exceed $10 million. The AICPA believes that this
is unfair because it essentially treats these individuals differently than
individual taxpayers.

In enacting the Tax Reform Act of 1986, Congress
recognized that small businesses should be allowed to continue to use the cash
method of accounting in order to avoid the higher costs of compliance which
would result if they are forced to use the accrual method. Raising the cap on
gross receipts to $10 million may also result in a barrier to growth because
firms will want to avoid triggering the accrual method mandate.

The message that Congress should not restrict the use of
the cash basis method is being delivered to members of the Ways and Means
Committee, and other members of Congress, by CPAs across the nation. Working
with state CPA societies, member CPA firms and CPAs who are AICPA Key Persons,
the Institute is informing lawmakers about the negative consequences the
provision would have on CPAs and other businesses. To date, 50 state CPA
societies sent letters to more than 400 members of Congress. Additionally, more
than 150 members of Congress received letters from CPA firms that would be
directly impacted by the proposal.

The profession’s congressional allies, including members
of the Congressional Caucus on CPAs and Accountants, are also calling attention
to the issue in letters to their colleagues and Ways and Means’ leadership.

The Ways and Means Committee’s desire to reform the tax
code is laudable. Throughout the process, Chairman Dave Camp (R-Mich.) has
expressed the belief that tax reform should be about making the code simpler
and fairer (two of the AICPA’s principles of good tax policy). But requiring
the use of accrual accounting will do neither. Given that the cash method
remains a far simpler method of accounting, simplicity justifies its continued
use by passthrough entities, professional service corporations and farmers –
regardless of their gross receipts.

Fall Review of State Legislative and Regulatory Issues: Part 2 of 2tag:typepad.com,2003:post-6a0133f5884316970b019b00fbe117970c2013-11-13T07:00:00-05:002013-11-13T11:35:55-05:00Across the county, state legislatures considered numerous issues that impact the CPA profession. In part two of this two-part post, we review issues dealing with: CPAs providing services for marijuana-related businesses, state board of accountancy reorganizations, sales tax on professional services and peer review. Marijuana Businesses and CPAs An issue...Guest Blogger

Across the county, state legislatures considered numerous issues that impact the CPA profession. In part two of this two-part post, we review issues dealing with: CPAs providing services for marijuana-related businesses, state board of accountancy reorganizations, sales tax on professional services and peer review.

Marijuana Businesses and CPAs

An issue with implications for the CPA profession centers on the legalization of marijuana for both recreational and medicinal use. While the sale and use of marijuana is illegal at the federal level, state governments and voters are increasingly showing a willingness, in certain jurisdictions, to decriminalize the drug. In November 2012, voters in Colorado and Washington approved ballot measures legalizing the recreational use of marijuana. A total of 19 states and the District of Columbia have laws permitting the use of marijuana for medical purposes. The AICPA, with input from the Colorado and Washington state CPA societies, has developed an issue brief that gives an overview of U.S. recreational and medicinal marijuana laws, the current legislative/regulatory environment and information for CPAs considering providing services to businesses that operate in these industries (including a list of questions for CPAs to ask themselves before considering this line of work).

Twelve states considered legislation in 2013 to decriminalize certain amounts of marijuana, while seven states saw legislation to legalize the drug for medicinal use.

In July 2013, New Hampshire Governor Maggie Hassan (D) signed legislation that authorizes the use of therapeutic cannabis in the state.

Independence of State Boards of Accountancy

Independent state boards of accountancy have access and control of their own funds, thus strengthening their ability to support certification, licensing and enforcement functions.

The Georgia General Assembly considered a bill that would transfer the Georgia State Board of Accountancy from the Secretary of State’s office to the State Accounting Office, thereby granting the Board more independence. The Georgia Society of CPAs supported the bill; however, it did not make it out of the House Judiciary Committee. The bill is likely to be heard during the 2014 regular legislative session.

Sales Taxes on Professional Services

The taxation of professional services became a key issue in 2013, as state policymakers sought ways in which to revamp their states’ tax structures. Many of the measures consisted of lowering tax rates while broadening the base.

Maine’s Legislature debated legislation that would have expanded the state’s sales and use tax to include services, and defined services as an activity engaged in for another person for a fee, retainer or commission. The bill was part of an effort to replace the state’s personal income tax with other forms of taxation in order to compete with neighboring New Hampshire, which does not have such a tax.

In Louisiana, a bill was introduced that would have levied a four percent sales tax on many services provided by CPAs and CPA firms.

South Dakota considered a measure that would have increased its current sales tax on services from four percent to five percent.

Minnesota Governor Mark Dayton (D) proposed expanding the state’s sales tax to a variety of services, including accounting services. A similar proposal was discussed in Ohio.

In North Carolina, a major push was made by lawmakers for tax modernization through adjusting, to varying degrees, the personal, corporate and sales and use taxes.

While none of these measures passed this year, the issue is expected to arise again in 2014.

Peer Review

A peer review is a periodic outside review of a CPA firm’s accounting and auditing practice by another CPA firm, aimed at helping the firm maintain and improve the quality of its services. Firms (and individuals) enrolled in programs following AICPA Standards are required to have a peer review, conducted by an independent reviewer, once every three years. With its emphasis on remediating deficiencies found in firms’ processes for performing accounting and auditing engagements, peer review serves the public interest.

The Florida Institute of CPAs scored a major victory in 2013 when Governor Rick Scott (R) signed legislation requiring licensed firms, except those providing compilations and reviews, to be enrolled in a peer review program as a condition of license renewal.

The Texas Legislature considered a measure to eliminate peer review requirements for those CPAs who prepare compilation reports for micro or small businesses. The Texas Society of CPAs worked to defeat the bill, which failed to pass out of committee.

With the enactment of the Florida legislation, Delaware, Puerto Rico and the U.S. Virgin Islands are now the only jurisdictions that have not passed peer review legislation. However, conversations are beginning among stakeholders in the state, and the Delaware Society of CPAs is likely to pursue legislation in 2014.

For more information about state legislation or regulations, please contact James Cox at jacox@aicpa.org.

Fall Review of State Legislative and Regulatory Issues: Part 1 of 2tag:typepad.com,2003:post-6a0133f5884316970b019b001f61df970b2013-10-22T07:00:00-04:002013-10-22T10:57:12-04:00Across the county, state legislatures considered numerous issues that impact the CPA profession. In Part one of this two-part post, we review legislation that affected CPA mobility, including streamlining military family licensure processes, promoting film tax credits and creating state tax tribunals. Part two will cover state board reorganizations, sales...Guest Blogger

Across the county, state legislatures considered numerous
issues that impact the CPA profession. In
Part one of this two-part post, we review legislation that affected CPA
mobility, including streamlining military family licensure processes, promoting
film tax credits and creating state tax tribunals. Part two will cover state board
reorganizations, sales tax on professional services, new peer review laws and CPAs
providing services for marijuana-related businesses.

Currently, 49 states and the District of Columbia have
passed individual CPA mobility
laws and the remaining U.S. jurisdictions are working toward this goal. These laws allow CPAs to operate across state
lines without obtaining reciprocal licenses in each state in which they
practice. New state legislation is sometimes
proposed in a way that can have unintended consequences on the profession’s mobility
regime. This year, there were three particularly
noteworthy areas where CPA cross-border practice could have been put in
jeopardy. These included:

the easing
of occupational licensing requirements for members of the military and their
spouses;

the creation of film tax incentives requiring audits by in-state
CPAs; and

the establishment of state tax tribunals wherein CPAs would seek
to represent taxpayers.

CPA Mobility and
Military Families

This year, state legislatures continued to streamline the occupational
licensure process for members of the military and their spouses who move across
state lines (a key component of the White House’s Joining Forces Campaign). These measures had the potential to impact
CPA mobility requirements, such as the concept of substantial equivalency, if
they did not consider existing laws and licensing requirements. (Substantial equivalency is the concept that a
CPA is a CPA, with the same competencies, experience, and other expertise,
across all state lines.) In 2013, 15
states enacted legislation allowing service members to apply experience gained
in the military to the requirements for licensure, while 11 states passed bills
that expedite the licensing process for military spouses.

The Wyoming Society of CPAs successfully worked
with the state’s board of accountancy and the office of the Wyoming Adjutant General
on Legislation to require state licensing boards to consider substantially
equivalent experience or training in determining whether a military service
member applicant meets that Board’s respective requirements.

In Hawaii, the Hawaii Society of CPAs worked
with other stakeholders to defeat a bill that would have allowed the state’s
professional licensing bodies to exempt military veterans from taking a
national or regional exam as a requirement for licensure. The bill could have potentially eliminated the
requirement that CPAs pass the Uniform CPA Examination in order to become
licensed in Hawaii, thus potentially harming the public and creating an uneven
playing field for CPA candidates seeking licensure around the country.

Film Tax Credits

Film production tax incentives are often used as a way to
attract the entertainment industry to states that are looking to boost their
economies. According to the National
Conference of State Legislatures, 45 states and Puerto Rico offer such
incentives in the form of tax credits, rebates and exemptions. In order to receive these incentives, many
states require film companies to have an audit performed by a CPA licensed in
that state, as opposed to one authorized to practice in the state. State laws
and legislation establishing such requirements are road blocks to the spirit of
cross-border practice.

In 2013, the Society of Louisiana CPAs
successfully worked with lawmakers to remove this restriction from a bill that
was signed into law by Governor Bobby Jindal (R).

State Tax Tribunals

Thirty-two states have created state tax tribunals as a
means to resolve state tax appeal controversies. These tribunals are a way, prior to
litigation, for taxpayers to appeal state tax authority decisions in a forum
outside the control of the authority. The
AICPA supports laws creating or modifying state tax tribunals to ensure that
all CPAs authorized to practice in the state are able to represent taxpayers
before these bodies. The AICPA has
developed a white paper that explains how proposed state tax tribunals can account for
mobility, and the paper also includes model legislative language specifically
to protect mobility. (The AICPA’s white paper is written with an eye toward model
language from the American Bar Association and is often used as a guide in
developing tax tribunal legislation.)

In 2013, Alabama, Colorado, Louisiana, Tennessee
and Texas considered proposals to create tax tribunals and to allow CPAs to
represent clients before those tribunals; however, legislation failed to pass
in these states.

A total of 49 states and the District of Columbia have
passed mobility laws and are now in the implementation and navigation phases. The AICPA and National Association of State
Boards of Accountancy have developed a free online tool to help
CPAs and accounting firms around the country understand the implications of CPA
Mobility and answer the common question “Does mobility apply to me?” For more information on CPA
mobility, visit AICPA.org.

In the News: AICPA to Congress: Consolidate Small Business Retirement Planstag:typepad.com,2003:post-6a0133f5884316970b019b001b0c86970d2013-10-18T06:52:45-04:002013-10-18T06:53:06-04:00The AICPA is gearing up for our Fall Meeting of Council, which begins Oct. 20 in Los Angeles. Be sure to follow @AICPA_JofA and @AICPANews on Twitter and subscribe to the AICPA’s Press Center RSS feed to keep up with all the news and information coming out of the meeting....James Schiavone

The AICPA is gearing up
for our Fall Meeting of Council, which begins Oct. 20 in Los
Angeles. Be sure to follow @AICPA_JofA and @AICPANews on Twitter and subscribe to the AICPA’s
Press Center RSS feed to keep up with all the
news and information coming out of the meeting.

In the meantime, I’ve
highlighted a few recent accounting articles in the news that you may missed
over the last week.

Accounting
Today covered the recent written
testimony that the AICPA submitted for the record
of the House Small Business Committee’s hearing on retirement savings for small
employers. In the testimony Jeffrey A. Porter, AICPA Tax Executive
Committee chairman, suggested several ways to simplify the complexity of the
retirement planning universe.

“When a small business grows and begins to explore options
for establishing a retirement plan, the alternatives, and the various rules,
can become overwhelming,” he wrote in his testimony.

“There are too many options that businesses need to consider
before deciding which plan is appropriate for them. Some plans are only
available to employers with a certain number of employees, whereas other plans
require mandatory contributions or create significant administrative burdens.
Such administrative burdens include annual return filings, discrimination
testing, and an extensive list of notice requirements with associated penalties
for failures and delays in distributing such notices to employees.”

More information on the AICPA’s advocacy efforts is available on
AICPA.org.

The AICPA recently announced their annual
curriculum awards, which are bestowed upon professors who have
developed innovative teaching practices that will help accounting students for
years to come.

The AICPA has long recognized and appreciated the
vital role that accounting educators play preparing accounting students to
become the accounting professionals of tomorrow. As the demands of the
marketplace continue to evolve, so to must the education that accounting
students receive if they are to be prepared to meet those needs.

Deanna White of AccountingWEB wrote an in-depth article about the awards,
including insights from the winners on how they believe their curriculum will
help students in the classroom and once they join the profession.

More information about
the AICPA educator awards, including a list of honorable mention recipients and
submission criteria, can be found online.

While the government
shut down deal reached yesterday means that federal workers who were furloughed
will likely be returning back to work soon, many Americans deal with furloughs each
year due to economic conditions and their company’s situation.

“If you find yourself struggling to make ends
meet, prioritize bills and pay those that could hurt the most first," said
Long. “Utility companies could cut off service if you miss a payment and charge
expensive reconnection fees. Missed payments could be reported to credit
agencies, lowering your credit score. Consider paying
utilities, credit cards and medical bills first.”